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Attorney General Lockyer Announces California Businesses Eligible for Restitution Under $2 Million-Plus Settlement of Internet Yellow Pages Case

YP.com Will Stop Using Account Activation Checks Under Settlement with 34 States
Thursday, December 14, 2006
Contact: (415) 703-5837

(SAN DIEGO) – Attorney General Bill Lockyer today announced YP.com (YP) and affiliate Telco Billing, Inc. will pay restitution to businesses and nonprofit groups in California and 33 other states under a $2 million-plus settlement that resolves allegations YP deceptively marketed enhanced advertising in its Internet yellow pages directory.

“Thousands of California businesses and nonprofits bought these services, many times unwittingly, or without fully understanding how the program worked, or the extent of their financial obligation,” said Lockyer. “We believe YP’s marketing practices caused these problems. The settlement advances consumers’ interests because it provides restitution to victims and imposes court-enforced reforms of YP’s business practices.”

Incorporated in Nevada, YP provides standard online business listings, using information purchased from other sources. Additionally, YP offers enhanced listings, called Internet Advertising Packages (IAP).” The IAPs provide businesses “preferred status” and listings that include links to a “mini-web page which may contain additional information about the business or organization,” according to an Agreed Statement of the Facts” that Lockyer filed today in San Diego County Superior Court along with the settlement.

YP’s direct mail marketing of IAPs included the use of “activation checks” that ranged from $3.25 to $3.50. By depositing the check, recipients activated an IAP account and agreed to pay monthly fees for the enhanced listing services. The activation checks included a statement above the endorsement line which informed prospective customers that by depositing the check, they agreed to pay monthly IAP fees, which would be collected automatically through the customer’s bank account or phone bill.

Despite the disclosure, “some businesses and some nonprofit organizations, including churches ... were unaware or remain unaware that they deposited an ‘activation check’ which resulted in an obligation towards YP, (or) were unaware that there was automatic withdrawal from the checking account for YP services,” the Statement of Facts says. Additionally, according to the Statement of Facts, some businesses or nonprofits mistakenly deposited the checks, or did not notice the disclosure statement above the endorsement line.

Lockyer’s office alleges the defendants’ marketing practices related to the activation checks violated state laws prohibiting unfair businesses practices, and false or misleading advertising.

In California, more than 65,500 businesses and nonprofits have received and deposited the activation checks since January 1, 2003. Under the settlement, California will receive $200,996 to provide restitution to former YP customers who deposited the checks, plus $75,000 to cover the state’s investigation costs.

Former customers will have six months to file claims for restitution. Each former customer could receive restitution for up to four months of IAP fees, which ranged from $24 to $29 per month. The Attorney General will use any money remaining from the $200,996 in restitution to fund the investigation of consumer protection cases.

The settlement also requires YP to notify current customers (those still paying IAP fees), that they have an opportunity to cancel and that they are eligible to receive a refund of their prior two months payment. Any refunds to current customers would be paid separately from the $2 million, which will be used solely to reimburse current customers and recoup the states’ costs.

Aside from the monetary payments, the settlement prohibits YP from using activation checks in marketing its services. Additionally, YP cannot pursue collection of unpaid IAP fees from customers whose accounts were initiated by depositing an activation check.

Businesses or nonprofit organizations who believe they may be eligible for restitution should contact the Public Inquiry Unit of the Attorney General’s Office at P.O. Box 944255, Sacramento, CA 94244-2550 or by e-mail at http://ag.ca.gov/contact/complaint_form.php?cmplt=PL .

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